Micron Earnings Could Test AI Hype After 40% Stock Surge

This article first appeared on GuruFocus.

Micron Technology Inc. (NASDAQ:MU) is stepping into earnings season after a record-breaking September, with its stock climbing nearly 40% in just a few weeks. Investors now want to know whether that momentum reflects genuine demand strength or simply an AI-fueled frenzy. Wall Street is betting that Micron’s forecast for high-bandwidth memory chips the backbone of AI data centers will confirm that growth is real. The surge in spending by companies like Oracle on AI infrastructure, alongside Nvidia’s investment commitments to OpenAI, has pushed memory and storage stocks into the spotlight. The question is whether Micron’s guidance can justify a rally that has already outpaced analyst targets.

Expectations are high. Analysts project fiscal fourth-quarter earnings of $2.65 per share on $11.2 billion in revenue, compared with $0.79 and $7.8 billion a year earlier. For the full fiscal year, Wall Street forecasts $7.42 per share on $37 billion in sales, a dramatic rebound from $0.70 and $25 billion in 2024. Micron has now delivered six straight quarters of profitability, and some investors believe this AI cycle could stretch beyond the usual six-to-eight-quarter DRAM run. Still, history shows Micron’s boom-bust pattern can swing sharply, and with shares closing at $164.62 on Monday above the consensus price target of $162.46 the room for error appears limited.

On valuation, Micron trades at just 12 times forward earnings, making it the cheapest name in the Philadelphia Semiconductor Index, which averages 26 times, and well below Nvidia (NASDAQ:NVDA) at 32 times. Bulls argue that’s attractive for a company anchoring AI infrastructure, but bears point to $14 billion in capital spending this year and even more next year as a heavy drag. Nearly 80% of analysts rate the stock a buy, yet even supporters acknowledge that DRAM remains a commodity business where pricing swings can quickly reshape profits. This quarter’s guidance could determine whether Micron is entering a longer-than-usual cycle of AI-driven growth or if the rally has run ahead of fundamentals.